Hotel Gets Makeover

A group of Los Angeles investors recently purchased the Hotel Californian and two neighboring properties on lower State Street with plans to begin construction of a new luxury hotel.

The Hotel Californian was built in 1925 and has remained vacant for years. The 35 State Street Hotel Partners — including the owners of the Century Plaza Hotel in Los Angeles, Michael Rosenfeld and the New Century Associates — intend to construct a 114-room hotel in the space that features nine fractional vacation units, over 21.5 thousand square feet of retail space and an underground garage with 243 parking spaces.

The new owners of the Hotel Californian (pictured on top) plan to remodel the vacant building and surrounding land to take advantage of their prime location.

According to Barbara Casey, public relations consultant for Rosenfeld, the investors purchased the properties because of their prime downtown location.

“[The Californian] has terrific upsides because it is a block from the beach and you can walk up State Street to all of the attractions that are up there,” Casey said.

Although the investment group would not release the purchase costs, the broker listing for all three properties was $8 million.

Casey said the investment group purchased the parcels with their own funds and will finance the project without the assistance of loans.

“[Rosenfeld] was the leader of the investor group and he would have done all of the analysis before he recommended that they should put money into [the Californian]” Casey said. “This was a debt-free project with no loans involved. The cash came from Michael and the others involved in the 35 State Street partnership.”

Some project that the remodeled hotel will provide a revenue boost for the county due to the bed tax on hotel rooms — a fee that the Santa Barbara South Coast Tourism Business Improvement District passed last September.

President of the Santa Barbara Chamber of Commerce Steve Cushman said the new hotel will also revitalize a stagnant area of downtown Santa Barbara.

“The city would benefit from the redevelopment of a pretty blighted area,” Cushman said. “Tax generated from the hotel bed tax would be $700,000 a year and retail tax would also be generated along with property tax. 200 more jobs would be created for the local economy, which would also be significant.”

According to Santa Barbara Mayor Helene Schneider, the site has experienced several failed attempts at revival from various owners.

“None of the members on the current council were on the council for the permitting process that took place eight to nine years ago,” Schneider said. “In the meantime that area has been a wasteland, which is a shame because the area is prime Santa Barbara real estate. We have had a few owners who have tried and failed. I hope the new owner will follow through on this project.”

Despite previous setbacks, Schneider said the current project will provide an attractive destination for tourists.

“Once [the Californian] is built it will have a huge positive economic impact,” Schneider said. “It will be a place for visitors to come and stay in downtown Santa Barbara and there will be shops and a vibrant downtown waterfront area that will have a key positive economic impact on the city.”

Although the new owners have not established a concrete time frame for the site’s construction, they have begun to clean the area of trash and graffiti.

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